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Pay Rs2,450 crore, make Rs1,63,557 crore

Saturday, 18 August 2012 - 8:30am IST | Place: New Delhi | Agency: dna

How the GMR Group and partners landed a massive booty.

It’s as damning an indictment as they come. The Delhi International Airport Ltd (DIAL), the joint venture controlled by the Hyderabad-based Grandhi Mallikarjuna Rao or GMR Group of Hyderabad, was given a licence to exploit 240 acres of prime land around the capital’s airport, valued at Rs 24,000 crore, for as many as 56 years for a fee of just Rs 2,450 crore – or a tenth of the land’s value.

If that weren’t enough, the Comptroller and Auditor General (CAG) said, DIAL itself calculated potential revenues from the land through exploitation over the next five decades at Rs 163,557 crore.

That means, with its 54% stake, DIAL alone stood to gain a monstrous Rs 88,337 crore -- or a 6,600% return on the Rs 1,323 crore (54% of Rs 2450 crore that GMR would have coughed up as per its stake in the joint venture), while the other partners stood to gain the balance Rs 75,220 crore.

The CAG also pointed out that the civil aviation ministry allowed DIAL to charge development fees (DF) from passengers using the airport, thereby amassing Rs 3,415.35 crore. This violated the sanctity of the bidding process because rival bidders were not aware of this advantage, the CAG said.

If the joint venture was to be permitted DF to finance the project after signing of the operation management development agreement (OMDA), “this important condition should have been known upfront to all the bidders at the time of bidding,” the CAG said.

It observed that approval by the ministry and later by AERA for levy of DF by DIAL (to bridge the funding gap) was a post contractual benefit provided to DIAL which was neither envisaged in the RFP nor included under any provision of OMDA or in the state support agreement (SSA).

The ministry, however said the levy was not a post contractual benefit. “The levy has also been upheld by the Supreme Court, which has already examined and rejected all the issues now being raised by CAG in its report,” the ministry said in its defence.
DIAL clarified that “DF is allowed as per Section 22 A of AAI Act 1994, as amended in 2003 – long before the bidding process – and hence was known to all bidders.”

The CAG also said extension of the airport concession period to DIAL was detrimental to public interests and should be reviewed.
According to the auditor, a cabinet note issued in 2003 specifically envisaged an initial concession period of 30 years which could be extended by another 30 years subject to ‘mutual agreement and negotiation of terms’. However, the condition envisaged in cabinet note was omitted from OMDA which was signed in April 2006.

“This is not only a violation of the commitment in the cabinet note but is also a unilateral and unfair advantage given to DIAL which is detrimental to government interest as it does not provide the government any scope for review of any of the conditions,” the report said.

But the ministry said the calculation of presumptive gain from the commercial use of land at the Delhi Airport is totally erroneous and misleading as it simply adds the nominal value of the projected revenue, without taking the net present value. The DIAL said that it had not received any undue benefits from the government before, during or after the bidding process.

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